LONDON — The euro climbed above 1.22 dollars on Monday as recent upbeat data sparked hope that the eurozone debt crisis will not derail the global economy, analysts said.
Sterling meanwhile rallied after the new British government cut state borrowing forecasts, which helped to offset a slashing of growth estimates.
The European single currency rose to 1.2232 dollars from 1.2106 dollars in New York late on Friday.
Against the Japanese unit, the dollar increased to 91.88 yen from 91.61 yen.
The dollar and euro gained ground as rising shares helped bolster risk appetite after recovery hopes were supported by a survey that showed US consumer confidence increasing before the weekend.
On Friday a private survey showed a stronger-than-expected rise in US consumer sentiment in June, fuelling optimism that retail sales would pick up after falling in May, when markets were roiled by eurozone debt worries.
US retail sales, a key part of the economy, fell for the first time in eight months in May, losing 1.2 percent.
At the same time, the University of Michigan's index rose to 75.5 in June from 73.6 in May, its highest since January 2008 and a percentage point better than expectations.
"Friday's unexpected 1.2-percent decline in US May retail sales seems to have been shrugged off by a market determined to focus on the positives after US consumer confidence rose in June to the most in two years," said CMC Markets analyst Michael Hewson.
"With growth in China and Japan also fuelling confidence the US dollar has slipped back from its recent highs in the hope that Europe's current problems, of which there are many, won't derail recovery prospects elsewhere."
One week ago, the euro had plunged to a four-year dollar low on the back of heightened concerns about the eurozone debt and deficit crisis, hitting 1.1877 dollars on Monday, June 7.
Meanwhile, EU president Herman Van Rompuy blamed the past strength of the European single currency for making the eurozone unaware of its fiscal problems, in an interview with the Financial Times published on Monday.
"What went wrong wasn't what happened this year. What went wrong was what happened in the first 11 years of the euro's history. In some ways we were victims of our success," Van Rompuy told the business daily.
"The euro became a strong currency ... It was like some kind of sleeping pill, some kind of drug. We weren?t aware of the underlying problems," he added.
He commenting that for many years the financial markets had not priced in enough difference between the debt issued by governments with strong finances and those with weak figures. This had encouraged undue borrowing by over-indebted countries, he said.
The European Union said on Monday that eurozone industrial production grew by 0.8 percent in April from March.
Britain meanwhile slashed its 2011 economic growth forecast to 2.6 percent and cut its public borrowing estimate to 155 billion pounds, according to official data on behalf of the new government.
The growth figure, published by an independent fiscal watchdog set up by British Prime Minister David Cameron's coalition administration, compared with the 3.25-percent expansion which had been forecast by the previous government.
The Office for Budget Responsibility (OBR) added in a statement that British gross domestic product (GDP) was expected to grow by 1.3 percent in 2010, which marked a slight upward revision.
The state borrowing forecast compared with the previous estimate of 163 billion pounds for the current 2010/2011 financial year which covers the 12 months to April 2011.
In London trade on Monday, the euro was at 1.2232 dollars against 1.2106 dollars on Friday, at 112.39 yen (110.94), 0.8307 pounds (0.8319) and 1.3904 Swiss francs (1.3918).
The dollar stood at 91.88 yen (91.61) and 1.1368 Swiss francs (1.1497).
The pound was at 1.4724 dollars (1.4550).
On the London Bullion Market, the price of gold rose to 1,231.98 dollars an ounce from 1,220 dollars an ounce on Friday.
